Dharmaj Crop Guard IPO Details

Dharmaj Crop Guard is an agrochemical company that manufactures, distributes, and markets a wide variety of agrochemical formulations to both B2C and B2B consumers. They categorise the product portfolio into the following groups: Insecticides, fungicides, herbicides, plant growth regulators micro fertilisers, and antibiotics. They provide crop protection solutions to farmers in order to help them enhance production and profitability. The firm exports to over 25 countries in Latin America, East Africa, the Middle East, and Far East Asia. The company sells agrochemical products in granules, powder and liquid forms our customers. They also produce and market generic insect and pest control chemicals for public and animal health protection. They got 464 registrations for agrochemical formulations from the CIB&RC, of which 269 are for sale in India as well as export and 195 are entirely for export. In addition to their branded items, they hold 157 trademark registrations. The firm had over 118 branded formulations marketed to farmers as of September 30, 2022. Furthermore, as of September 30, 2022, they have over 154 institutional items that we marketed to over 600 clients in India and beyond.

Rationale

The Rs. 251 Cr IPO consists of fresh issue of Rs 216 cr and offer for sale of Rs 35 cr. The company intends to utilize a portion of proceeds to set up a manufacturing facility at Saykha Bharuch, Gujarat, funding working capital requirements, repayment and/or pre-payment of certain borrowings and general corporate purposes. With expected increase in population, the demand for food grain is likely to rise and consumption requirements are to be met with decreasing arable land. Thus, raising farm productivity becomes important and this can be done with optimal usage of products like agrochemicals. This, in turn, is expected to support higher consumption of fungicides. The overall Indian pesticides and other agrochemicals industry is estimated to increase at a CAGR of 7.5%-8.5% by 2026-27 on account of an upward growth expected in the international market and a likely increase in domestic usage. India’s per hectare consumption of pesticides is minimal 0.6 kg which is even lower than the world average of 2.6 kg / hectare.

Revenue from operations has grown at a CAGR of 41.02% from Fiscal 2020 to Fiscal 2022 and PAT has grown at a CAGR of 63.30% from Fiscal 2020 to Fiscal 2022. PAT margin was 5.43%, 6.93%, 7.28% and 8.31%, for Fiscals 2020, 2021 and 2022 and four months period ended on July 31, 2022, respectively. Gross margin was 21.62%, 20.83%, 20.28% and 18.55% for Fiscals 2020, 2021 and 2022 and four months period ended on July 31, 2022. In Fiscals 2020, 2021, 2022 and for the four months period ended July 31, 2022, company’s trade receivables were 16.73%, 11.92%, 21.70% and 65.80% of their total income. Bad debts amounted to Rs. 2.25 million, Rs. 0.22 million, nil in same periods and 9.17%, 5.26%, 4.03% and 1.50% of their trade receivables were pending beyond a period of 180 days in Fiscals 2020, 2021, 2022 and for the four months period ended July 31, 2022. They have established an extensive distribution network that comprised over 4,362 dealers, as of September 30, 2022. Capacity utilisation was 34.87%, 66.47% and 65.62% for financial years ended March 31, 2022, 2021 and 2020. In Fiscals 2020, 2021 and 2022 and the four months ended July 31, 2022, the top 3 raw material suppliers (domestic) contributed to 28.04%, 28.62%, 25.01% and 28.55%, respectively, of the cost of material consumed in such periods. Historically the trade payables days were 85 days for the FY 2022 and they anticipate the same to reduce to 32 days for Fiscal 2023. They are anticipating decline in trade receivable days to 60 days from Fiscal 2023 onwards.